The Reader Magazine http://www.readernation.org Sat, 20 Dec 2014 17:57:23 +0000 en-US hourly 1 http://wordpress.org/?v=4.0.1 Taxpayers Could Be on the Hook for Trillions in Oil Derivatives http://www.readernation.org/taxpayers-could-be-on-the-hook-for-trillions-in-oil-derivatives/ http://www.readernation.org/taxpayers-could-be-on-the-hook-for-trillions-in-oil-derivatives/#comments Sat, 20 Dec 2014 17:57:23 +0000 http://www.readernation.org/?p=5239 What is one to make of the sudden dramatic collapse in the price of oil?  The result could be trillions of dollars in oil derivative losses; and the FDIC could be liable, following repeal of key portions of the Dodd-Frank Act last weekend.

Senator Elizabeth Warren charged Citigroup last week with “holding government funding hostage to ram through its government bailout provision.” At issue was a section in the omnibus budget bill repealing the Lincoln Amendment to the Dodd-Frank Act, which protected depositor funds by requiring the largest banks to push out a portion of their derivatives business into non-FDIC-insured subsidiaries.

Warren and Representative Maxine Waters came close to killing the spending bill because of this provision. But the tide turned, according to Waters, when not only Jamie Dimon, CEO of JPMorgan Chase, but President Obama himself lobbied lawmakers to vote for the bill.

It was not only a notable about-face for the president but represented an apparent shift in position for the banks. Before Jamie Dimon intervened, it had been reported that the bailout provision was not a big deal for the banks and that they were not lobbying heavily for it, because it covered only a small portion of their derivatives. As explained in Time:

The best argument for not freaking out about the repeal of the Lincoln Amendment is that it wasn’t nearly as strong as its drafters intended it to be. . . . [W]hile the Lincoln Amendment was intended to lasso all risky instruments, by the time all was said and done, it really only applied to about 5% of the derivatives activity of banks like Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo, according to a 2012 Fitch report.

Quibbling over a mere 5% of the derivatives business sounds like much ado about nothing, but Jamie Dimon and the president evidently didn’t think so. Why?

A Closer Look at the Lincoln Amendment

The preamble to the Dodd-Frank Act claims “to protect the American taxpayer by ending bailouts.” But it does this through “bail-in”: authorizing “systemically important” too-big-to-fail banks to expropriate the assets of their creditors, including depositors. Under the Lincoln Amendment, however, FDIC-insured banks were not allowed to put depositor funds at risk for their bets on derivatives, with certain broad exceptions.

In an article posted on December 10th titled “Banks Get To Use Taxpayer Money For Derivative Speculation,” Chriss W. Street explained the amendment like this:

Starting in 2013, federally insured banks would be prohibited from directly engaging in derivative transactions not specifically hedging (1) lending risks, (2) interest rate volatility, and (3) cushion against credit defaults. The “push-out rule” sought to force banks to move their speculative trading into non-federally insured subsidiaries.

The Federal Reserve and Office of the Comptroller of the Currency in 2013 allowed a two-year delay on the condition that banks take steps to move swaps to subsidiaries that don’t benefit from federal deposit insurance or borrowing directly from the Fed.

The rule would have impacted the $280 trillion in derivatives primarily held by the “too-big-to-fail (TBTF) banks that include JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. Although 95% of TBTF derivative holdings are exempt as legitimate lending hedges, leveraging cheap money from the U.S. Federal Reserve into $10 trillion of derivative speculation is one of the TBTF banks’ most profitable business activities.

What was and was not included in the exemption was explained by Steve Shaefer in a June 2012 article in Forbes. According to Fitch Ratings, interest rate, currency, gold/silver, credit derivatives referencing investment-grade securities, and hedges were permissible activities within an insured depositary institution. Those not permitted included “equity, some credit and most commodity derivatives.” Schaefer wrote:

For Goldman Sachs and Morgan Stanley, the rule is almost a non-event, as they already conduct derivatives activity outside of their bank subsidiaries. (Which makes sense, since neither actually had commercial banking operations of any significant substance until converting into bank holding companies during the 2008 crisis).

The impact on Bank of America, Citigroup, JPMorgan Chase, and to a lesser extent, Wells Fargo, would be greater, but still rather middling, as the size and scope of the restricted activities is but a fraction of these firms’ overall derivative operations.

A fraction, but a critical fraction, as it included the banks’ bets on commodities. Five percent of $280 trillion is $14 trillion in derivatives exposure – close to the size of the existing federal debt. And as financial blogger Michael Snyder points out, $3.9 trillion of this speculation is on the price of commodities.

Among the banks’ most important commodities bets are oil derivatives. An oil derivative typically involves an oil producer who wants to lock in the price at a future date, and a counterparty – typically a bank – willing to pay that price in exchange for the opportunity to earn additional profits if the price goes above the contract rate. The downside is that the bank has to make up the loss if the price drops.

As Snyder observes, the recent drop in the price of oil by over $50 a barrel – a drop of nearly 50% since June – was completely unanticipated and outside the predictions covered by the banks’ computer models. The drop could cost the big banks trillions of dollars in losses. And with the repeal of the Lincoln Amendment, taxpayers could be picking up the bill.

When Markets Cannot Be Manipulated

Interest rate swaps compose 82% of the derivatives market. Interest rates are predictable and can be controlled, since the Federal Reserve sets the prime rate. The Fed’s mandate includes maintaining the stability of the banking system, which means protecting the interests of the largest banks. The Fed obliged after the 2008 credit crisis by dropping the prime rate nearly to zero, a major windfall for the derivatives banks – and a major loss for their counterparties, including state and local governments.

Manipulating markets anywhere is illegal – unless you are a central bank or a federal government, in which case you can apparently do it with impunity.

In this case, the shocking $50 drop in the price of oil was not due merely to the forces of supply and demand, which are predictable and can be hedged against. According to an article by Larry Elliott in the UK Guardian titled “Stakes Are High as US Plays the Oil Card Against Iran and Russia,” the unanticipated drop was an act of geopolitical warfare administered by the Saudis. History, he says, is repeating itself:

The fourfold increase in oil prices triggered by the embargo on exports organised by Saudi Arabia in response to the Yom Kippur war in 1973 showed how crude could be used as a diplomatic and economic weapon.

Now, says Elliott, the oil card is being played to force prices lower:

John Kerry, the US secretary of state, allegedly struck a deal with King Abdullah in September under which the Saudis would sell crude at below the prevailing market price. That would help explain why the price has been falling at a time when, given the turmoil in Iraq and Syria caused by Islamic State, it would normally have been rising.

. . . [A]ccording to Middle East specialists, the Saudis want to put pressure on Iran and to force Moscow to weaken its support for the Assad regime in Syria.

War on the Ruble

If the plan was to break the ruble, it worked. The ruble has dropped by more than 60% against the dollar since January.

On December 16th, the Russian central bank counterattacked by raising interest rates to 17% in order to stem “capital flight” – the dumping of rubles on the currency markets. Deposits are less likely to be withdrawn and exchanged for dollars if they are earning a high rate of return.

The move was also a short squeeze on the short sellers attempting to crash the ruble. Short sellers sell currency they don’t have, forcing down the price; then cover by buying at the lower price, pocketing the difference. But the short squeeze worked only briefly, as trading in the ruble was quickly suspended, allowing short sellers to cover their bets. Who has the power to shut down a currency exchange? One suspects that more than mere speculation was at work.

Protecting Our Money from Wall Street Gambling

The short sellers were saved, but the derivatives banks will still get killed if oil prices don’t go back up soon. At least they would have been killed before the bailout ban was lifted. Now, it seems, that burden could fall on depositors and taxpayers. Did the Obama administration make a deal with the big derivatives banks to save them from Kerry’s clandestine economic warfare at taxpayer expense?

Whatever happened behind closed doors, we the people could again be stuck with the tab. We will continue to be at the mercy of the biggest banks until depository banking is separated from speculative investment banking. Reinstating the Glass-Steagall Act is supported not only by Elizabeth Warren and others on the left but by prominent voices such as David Stockman’s on the right.

Another alternative for protecting our funds from Wall Street gambling can be done at the local level. Our state and local governments can establish publicly-owned banks; and our monies, public and private, can be moved into them.

_________________

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 200+ blog articles are at EllenBrown.com.

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A Tale from India http://www.readernation.org/a-tale-from-india/ http://www.readernation.org/a-tale-from-india/#comments Fri, 19 Dec 2014 18:39:08 +0000 http://www.readernation.org/?p=5236 In the last nine years, Gangabai has lost both her husband and her son to suicide; her son, despondent and desperate, took his life on Dec 8th, 2014. Tears in her eyes, she described the difficulties of life on the cotton farms. Behind her, Yogita, 25, a new widow, tends to her son Kanhanniya, 1. He has a fever today but is happily running around; he is too young to know that he is suddenly fatherless. Yogita’s movements are a bit deliberate- she is to deliver her second child in 3 months. She has a tough life ahead.

Moreshwar Chaudhary, 32, killed himself around 3pm on Dec 8th by imbibing insecticide.  A small scale cotton farmer with 3 acres to cultivate, Moreshwar was indebted to banks, private lenders, and to a microcredit facility and could not meet the payments. The family mortgaged everything including Yogita’s wedding jewelry. Gangabai, his frail sixty-something mother, went back to work as a day laborer to make some money but still they could not manage to make their payments. Moreshwar really wanted to get Yogita’s jewelry out of hawk but could not find the money. And the fields did not help. This year, the drought conditions are the worst in decades and the cotton is sparse. Meanwhile the price of these commodities has come down and the input costs have gone up. This cruel hat-trick connived to make cultivation an economically detrimental activity and further immiserated the family; bereft of income and hope, Moreshwar could no longer take the enormous stress and pain and chose to commit suicide.

Huddled in their modest home, we saw Moreshwar’s wedding picture.  He looked peaceful and proud. His older sister sat stoically, supporting Gangabai.  A friend of the family, a young man, played with Kanhanniya while telling us about the state of life in the village right now.  Others huddled inside and outside the home.  Yogita’s parents have come from their village to be with her.  In this sense, Gangabai and Yogita are lucky- they have a community; this is not always the case given that the traditional social bonds in villages have been rent by a variety of factors that can together be called “modernity.”  Veteran journalist Jaideep Hardikar, who arranged our visit to Gangabai’s village, put it best- “there is nothing to romanticize about the village.”

Moreshwar’ s death does not mean the erasure of debt.  The debt that plagued the family and ultimately led to Moreshwar’s suicide, is also in Gangabai’s name. The path ahead is painful- and lonely. Lonely especially for Yogita who at 25 will now be consigned to a life of difficulty; in her community widow remarriage is proscribed. She might stay with Gangabai or might move back in with her parents, also desperate small-holding farmers. Right now, it’s too early.  Moreshwar has only been gone a few days.

Shyamrap Bhoyar of Anji village is feeling the same hollowness that Gangabai feels.  On Dec 8th, his younger son Suraj, 29, called his older son Swapnil, 33, at about 3pm.  “I’ve swallowed poison, now you take care of things please.  I won’t be able to speak to you again” he said as he lay dying.

Shyamrap and Swapnil sit on a cot in their small house staring blankly and speaking haltingly.  Suraj had many things on his mind during the last few days before his suicide. The agricultural distress in Vidharbha continues and the cycle of poverty-debt-destitution caught up with him. Add to that two other factors:  some serious medical bills (at usurious rates) and the prospect of an already-delayed marriage- with its attendant costs- were too much for this young man to take.

The Bhoyar family has 12 acres of land which they cultivate. While that is 4 times as much as Gangabai’s family has, the results are not much better. 12 acres of largely unproductive land, with the linear rise in input costs and labor, put the family in further losses this year.

A tall, lean, polite, and soft-spoken man, Swapnil fights back tears; his eyes are red and watery. “I have lost a brother and a partner” he says in Marathi (translated for me by Jaideep). He has a young daughter who gestures to us lovingly.  “Say bye to Uncle” says Swapnil.  She says “bye, bye, bye.”  I am sure she will miss her uncle.

These are two suffering families out of hundreds of thousands who have lost loved-ones to suicide. These are two suffering families out of millions of farmers whose lives are getting increasingly desperate by the day.

Award-winning journalist P. Sainath has documented these stories and provided  a deep structural explanation of agrarian distress. The important things to understand are that these stories of despondency and destitution are neither isolated nor are they disconnected from global and domestic processes that favor speculation over agricultural production and subsidize swollen urban areas over the rural hinterlands of India. Added to that are pricing and IP-based regimes promoted by MNCs that not only destroy local methods of sustainable agricultural but create a cost structure that is not paid-off by prices received in the marketplace.

Gangabai and Shyamrap have lost their children to these processes. The least the rest of us can do is re-examine our faith in the economic system we’re pursuing and avoid glib recitations that suggest that we are all “growing,” “shining,” “vibrant” and “incredible.”

Far from it. Ask Gangabai. Ask Shyamrap.

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DOJ Says It Will Subpoena NYT Reporter James Risen http://www.readernation.org/doj-says-it-will-subpoena-nyt-reporter-james-risen/ http://www.readernation.org/doj-says-it-will-subpoena-nyt-reporter-james-risen/#comments Wed, 17 Dec 2014 15:54:49 +0000 http://www.readernation.org/?p=5233

The United States government has confirmed that it will seek limited testimony from New York Times reporter James Risen, according to court documents filed Tuesday, in regards to his relationship with the alleged CIA leaker Jeffery Sterling.

Ahead of the official filing, press freedom advocates had welcomed the news that the Department of Justice would not press the journalist to expose the anonymous source or sources for his 2006 book, State of War.

According to the Justice Department filing (pdf), Holder has authorized prosecutors to seek Risen’s testimony in regards to the facts that Risen has a confidentiality agreement with his source or sources for his book, as well as for two earlier New York Times articles, and that Risen had a previous “non-confidential reporter-source relationship” with Jeffrey Sterling. Sterling is accused of leaking information related to a botched CIA mission to sabotage Iran’s alleged nuclear weapons program, which Risen writes about in his book.

Risen’s attorney, Joel Kurtzberg, told the Alexandria, Virginia court on Tuesday that although Risen had expressed willingness to confirm some of that information previously, he was unsure if his client would comply in this case. The federal government’s pursuit of Risen has become a battle over the First Amendment rights of journalists and, according to advocates, threatens the ability of reporters to promise confidentiality to sources.

Reporting on the hearing, Politico reporter Josh Gerstein, who has followed the Risen case closely, wrote that Kurtzberg “made clear that whatever questions Risen ultimately answers would ultimately be under compulsion of a subpoena.”

“He’s certainly not volunteering to be here,” Kurtzberg told the court.

Further, according the Washington Post: “Edward B. MacMahon Jr., Sterling’s attorney, said he was just reviewing the prosecutors’ filing, but he noted that their investigation into Risen was extensive and said the idea of limited questioning of the reporter was ‘hard for us to fathom at this point in time.’ He said prosecutors had obtained Risen’s FedEx records, credit card receipts and even some type of Western Union transaction to at least one of his children.”

It was also noted during the hearing that the DOJ filing did not specify whether defense lawyers would be limited in their questioning of Risen.

Investigative journalist Marcy Wheeler speculates that the government may be hoping that Sterling’s defense team will demand Risen’s complete testimony in an effort to keep Sterling out of prison.

Kurtzberg did confirm that Risen would attend a January 5th hearing, which the court called a “moot of Mr. Risen’s testimony,” during which the court can determine “exactly what questions Mr. Risen will answer […] without burdening the jury’s time.”

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Can We Get to Zero Nuclear Weapons? http://www.readernation.org/can-we-get-to-global-zero-nuclear-weapons/ http://www.readernation.org/can-we-get-to-global-zero-nuclear-weapons/#comments Wed, 17 Dec 2014 15:33:11 +0000 http://www.readernation.org/?p=5230 It was one of the most stirring speeches an American president had ever given. The place was Prague; the year was 2009; the president was the recently sworn in Barack Obama. The promise made that day is worth recalling at length, especially since, by now, it is largely forgotten:

“As the only nuclear power to have used a nuclear weapon, the United States has a moral responsibility to act… So today, I state clearly and with conviction America’s commitment to seek the peace and security of a world without nuclear weapons. I’m not naive. This goal will not be reached quickly — perhaps not in my lifetime. It will take patience and persistence. But now, we, too, must ignore the voices who tell us that the world cannot change. We have to insist, ‘Yes, we can…’”

President Obama had been in office only three months when, boldly claiming his place on the world stage, he unequivocally committed himself and his country to a nuclear abolition movement that, until then, had at best existed somewhere on the distant fringes of power politics. “I know,” he added,

“that there are some who will question whether we can act on such a broad agenda. There are those who doubt whether true international cooperation is possible… and there are those who hear talk of a world without nuclear weapons and doubt whether it’s worth setting a goal that seems impossible to achieve. But make no mistake. We know where that road leads.”

The simple existence of nuclear weapons, an American president declared, paved the road to perdition for humanity.

Obama as The Captain Ahab of Nuclear Weapons

At that moment, the foundations for an imagined abolitionist world were modest indeed, but not nonexistent.  The 1968 Nuclear Non-Proliferation Treaty (NPT) had, for instance, struck a bargain between nuclear haves and have-nots, under which a path to abolition was treated as real.  The deal seemed clear enough: the have-nots would promise to forego obtaining nukes and, in return, the world’s reigning nuclear powers would pledge to take, in the words of the treaty, “effective measures in the direction of nuclear disarmament.”

For decades before the Obama moment, however, the superpower arsenals of nuclear warheads continued to grow like so many mushrooms, while new nuclear states — Israel, Pakistan, India, North Korea — built their own impressive arsenals.  In those years, with the singular exception of South Africa, nuclear-weapons states simply ignored their half of the NPT bargain and the crucial clause mandating progress toward eventual disarmament was all but forgotten.

When the Cold War ended in 1991 with the disappearance of the Soviet Union, and the next year Americans elected as president Bill Clinton, who was famously against the Vietnam War, it was at least possible to imagine that nukes might go the way of internationally banned chemical weapons. But Washington chose otherwise.  Despite a paucity of enemies anywhere on Earth, the Pentagon’s 1994 Nuclear Posture Review insisted on maintaining the American nuclear arsenal at Cold War levels as a “hedge,” an insurance policy, against an imagined return of Communism, fascism, or something terrible in Russia anyway — and Clinton accepted the Pentagon’s position.

Soon enough, however, even prominent hawks of the Cold War era began to worry that such a nuclear insurance policy could itself ignite a global fire. In 1999, a chief architect of the nuclear mindset, Paul Nitze, stepped away from a lifetime obsession with building up nuclear power to denounce nukes as “a threat mostly to ourselves” and to explicitly call for unilateral disarmament. Other former apostles of nuclear realpolitik also came to embrace the goal of abolition. In 2008, four high priests of the cult of nuclear normalcy — former Senator Sam Nunn, former Secretary of Defense William J. Perry, and former Secretaries of State George Schultz and Henry Kissinger — jointly issued a sacrilegious renunciation of their nuclear faith on the Wall Street Journal’s editorial page. “We endorse setting the goal of a world free of nuclear weapons,” they wrote, “and working energetically on the actions required to achieve that goal.”

Unfortunately, such figures had come to Jesus only after leaving office, when they were exempt from the responsibility of matching their high-flown rhetoric with the gritty work of making it real.

Obama in Prague was another matter.  He was at the start of what would become an eight-year presidency and his rejection of nuclear fatalism rang across the world. Only months later, he was awarded the Nobel Peace Prize, in large part because of this stunning commitment. A core hope of the post-World-War-II peace movement, always marginal, had at last been embraced in the seat of power. A year later, at Obama’s direction, the Pentagon, in its 2010 Nuclear Posture Review, actually advanced the president’s purpose, committing itself to “a multilateral effort to limit, reduce, and eventually eliminate all nuclear weapons worldwide.”

“The United States,” that document promised, “will not develop new nuclear warheads.” When it came to the future of the nuclear arsenal, a program of responsible maintenance was foreseen, but no new ground was to be broken. “Life Extension Programs,” the Pentagon promised, “will use only nuclear components based on previously tested designs, and will not support new military missions or provide new military capabilities.”

Obama’s timing in 2009 was critical. The weapons and delivery systems of the nuclear arsenal were aging fast. Many of the country’s missiles, warheads, strategic bombers, and nuclear-powered submarines dated back to the early Cold War era and were effectively approaching their radioactive sell-by dates. In other words, massive reductions in the arsenal had to begin before pressures to launch a program for the wholesale replacement of those weapons systems grew too strong to resist.  Such a program, in turn, would necessarily mean combining the latest technological innovations with ever greater lethality in a way guaranteed to reinvigorate the entire enterprise across the world — the polar opposite of “effective measures in the direction of nuclear disarmament.”

Obama, in other words, was presiding over a golden moment, but an apocalyptic deadline was bearing down. And sure enough, that deadline came crashing through when three things happened: Vladimir Putin resurfaced as an incipient fascist intent on returning Russia to great power status; extremist Republicans took Congress hostage; and Barack Obama found himself lashed, like Herman Melville’s Captain Ahab, to “the monomaniac incarnation of all those malicious agencies which some deep men feel eating in them, till they are left living on half a heart and half a lung.” Insiders often compare the Pentagon to Moby Dick, the Great White Whale, and Obama learned why. The peaceful intentions with which he began his presidency were slapped away by the flukes of the monster, like so many novice oarsmen in a whaling skiff.

Hence Obama’s course reversals in Iraq, Afghanistan, and Syria; hence the White House stumbles, including an unseemly succession of secretaries of defense, the fourth of whom, Ashton Carter, can reliably be counted on to advance the renewal of the nuclear force. The Pentagon’s “intangible malignity,” in Melville’s phrase, was steadily quickened by both Putin and the Republicans, but Obama’s half-devoured heart shows in nothing so much as his remarkably full-bore retreat, in both rhetoric and policy, from the goal of nuclear abolition.

A recent piece by New York Times science correspondent William J. Broad made the president’s nuclear failure dramatic. Cuts to the U.S. nuclear stockpile initiated by George H.W. Bush and George W. Bush, he pointed out, totaled 14,801 weapons; Obama’s reductions so far: 507 weapons. In 2010, a new START treaty between Moscow and Washington capped future deployed nukes at 1,500. As of this October, the U.S. still deploys 1,642 of them and Russia 1,643; neither nation, that is, has achieved START levels, which only count deployed weapons. (Including stored but readily re-armed and targeted nukes, the U.S. arsenal today totals about 4,800 weapons.)

In order to get the votes of Senate Republicans to ratify the START treaty, Obama made what turned out to be a devil’s bargain.  He agreed to lay the groundwork for a vast “modernization” of the U.S. nuclear arsenal, which, in the name of updating an aged system, is already morphing into a full-blown reinvention of the arms cache at an estimated future cost of more than a trillion dollars. In the process, the Navy wants, and may get, 12 new strategic submarines; the Air Force wants, and may get, a new long-range strike bomber force. Bombers and submarines would, of course, both be outfitted with next-generation missiles, and we’d be off to the races. The arms races.

All of this unfolds as Vladimir Putin warms the hearts of nuclear enthusiasts everywhere not only by his aggressions in Ukraine, but also by undercutting the landmark 1987 Intermediate-Range Nuclear Forces Treaty by testing a new ground-launched cruise missile. Indeed, just this fall, Russia successfully launched a new intercontinental ballistic missile. It seems that Moscow, too, can modernize.

On a Twenty-First Century Road to Perdition

Responding to the early Obama vision of “effective measures” toward nuclear disarmament, and following up on that 2010 Nuclear Posture Review, senior Pentagon officials pursued serious discussions about practical measures to reduce the nuclear arsenal. Leading experts advocated a shift away from the Cold War’s orgasmic strike targeting doctrine that still necessitates an arsenal of weapons counted in the thousands.

In fact, in response to budget constraints, legal obligations under a jeopardized non-proliferation treaty, and the most urgent moral mandate facing the country, America’s nuclear strategy could shift without wrenching difficulty, at the very least, to one of “minimal deterrence.” Hardcore national security mavens tell us this. Such a shift would involve a reduction in both the deployed and stored nuclear arsenal to something like 500 warheads. Even if that goal were pursued unilaterally, it would leave more than enough weaponry to deter any conceivable state-based nuclear threat, including Russia’s, no matter what Putin may do.

Five hundred is, of course, a long way from zero and so from the president’s 2009 goal of abolition, and yet opposition even to that level would be fierce in Washington. Though disarming and disposing of thousands of nukes would cost far less than replacement, it would still be expensive, and you can count on one thing: Pentagon nuclearists would find firm allies among congressional Republicans, who would be loathe to fund such a retreat from virtue’s Armageddon. Meanwhile, confronting such cuts, the defense industry’s samurai lobbyists would unsheathe their swords.

But if a passionate Obama could make a compelling case for a nuclear-free world from Prague in 2009, why not go directly to the American people and make the case today? There is, of course, no sign that the president intends to do such a thing any longer, but if a commander-in-chief were to order nuclear reductions into the hundreds, the result might actually be a transformation of the American political conscience. In the process, the global dream of a nuclear-free world could be resuscitated and the commitment of non-nuclear states (including Iran) to refrain from nuclear-weapons development could be rescued. Most crucially, there would no longer be any rationale for the large-scale reinvention of the American nuclear arsenal, a deadly project this nation is even now preparing to launch. At the very least, a vocal rededication to an ultimate disarmament, to the actual abolition of nuclear weapons, would keep that road open for a future president to re-embark upon.

Alas, Pentagon advocates of “minimal deterrence” have already been overridden. The president’s once fiercely held conviction is now a mere shadow of itself. As happened with Ahab’s wrecked whaling ship, tumultuous seas are closing over the hope that once seized the world’s attention. Take it for granted that, in retirement and out of power, ex-president Obama will rediscover his one-time commitment to a world freed from the nuclear nightmare. He will feel the special responsibility proper to a citizen of “the only nuclear power to have used a nuclear weapon.” The then-former president’s speeches on the subject will be riveting and his philanthropy will be sharply targeted. All for naught.

Because of decisions likely to be taken this year and next, no American president will ever again be able to embrace this purpose as Obama once did. Nuclear weapons will instead become a normalized and permanent part of the twenty-first century American arsenal, and therefore of the arsenals of many other nations; nuclear weapons, that is, will have become an essential element of the human future — as long as that future lasts.

So yes, mark these days down. Nuclear abolition itself is being abolished. Meanwhile, let us acknowledge, as that hopeful young president once asked us to, that we know where this road leads.

James Carroll is a Boston Globe columnist and Distinguished Scholar-in-Residence at Suffolk University. He is the author, among other works, of House of War: The Pentagon and the Disastrous Rise of American Power and, most recently, Christ Actually: The Son of God for the Secular Age.

Follow TomDispatch on Twitter and join us on Facebook. Check out the newest Dispatch Book, Rebecca Solnit’s Men Explain Things to Me, and Tom Engelhardt’s latest book, Shadow Government: Surveillance, Secret Wars, and a Global Security State in a Single-Superpower World.

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American Torture — Past, Present, and Future? http://www.readernation.org/american-torture-past-present-and-future/ http://www.readernation.org/american-torture-past-present-and-future/#comments Tue, 16 Dec 2014 17:34:28 +0000 http://www.readernation.org/?p=5225

It’s the political story of the week in Washington. At long last, after the endless stalling and foot-shuffling, the arguments about redaction and CIA computer hacking, the claims that its release might stoke others out there in the Muslim world to violence and “throw the C.I.A. to the wolves,” the report — you know which one — is out.  Or at least, the redacted executive summary of it is available to be read and, as Senator Mark Udall said before its release, “When this report is declassified, people will abhor what they read. They’re gonna be disgusted. They’re gonna be appalled. They’re gonna be shocked at what we did.”So now we can finally consider the partial release of the long-awaited report from the Senate Select Committee on Intelligence about the gruesome CIA interrogation methods used during the Bush administration’s “Global War on Terror.” But here’s one important thing to keep in mind: this report addresses only the past practices of a single agency. Its narrow focus encourages us to believe that, whatever the CIA may have once done, that whole sorry torture chapter is now behind us.

In other words, the moment we get to read it, it’s already time to turn the page. So be shocked, be disgusted, be appalled, but don’t be fooled. The Senate torture report, so many years and obstacles in the making, should only be the starting point for a discussion, not the final word on U.S. torture. Here’s why.

Mainstream coverage of U.S. torture in general, and of this new report in particular, rests on three false assumptions:

1. The most important question is whether torture “worked.”

2. U.S. torture ended when George W. Bush left office.

3. The only kind of torture that really “counts” happens in foreign war zones.

Let’s look at each of these in order.

False Assumption #1: The only question is “Did it work?”

Maybe torture “worked” on occasion. Probably it didn’t. But it doesn’t matter because torture is illegal under U.S. and international law, and it’s a moral abomination.

The Senate report’s first finding — and the one that much of a highly predictable debate will focus on — is that the CIA’s “enhanced interrogation techniques” were “ineffective” in identifying the perpetrators of 9/11, producing actionable intelligence, or preventing terrorist attacks. In response, the rhetoric is already flying. The Republicans (except for Senator John McCain) are jumping up and down shouting “It did work! It did!” The president’s own CIA director, John Brennan, has issued his denunciation of the report. While acknowledging that “the Agency made mistakes,” he, too, insisted that torture “worked.” (A couple of days later, he backtracked, suggesting instead that the answer to this question was actually “unknowable.”) Other former officials of the Agency are chiming in big time.

In the end, it doesn’t matter whether the CIA’s methods — including waterboarding (which McCain calls “mock execution” and “an exquisite form of torture”); inflicting week-long sleep deprivation; repeated beatings; hanging people by their wrists for days, bombarding them with unbearable sound and light or keeping them in total darkness; threatening to sexually abuse their mothers or harm their children; or, in possibly five cases, shoving a tube up someone’s rectum and filling it with water (supposedly for “rectal rehydration”) — were effective. It doesn’t matter whether these methods led the Navy Seals to Osama bin Laden. It doesn’t matter whether these methods prevented an al-Qaeda attack on the Library Tower in Los Angeles. It doesn’t matter whether they saved American (and only American!) lives. In fact, for those who read the report, the Senate committee is remarkably convincing on a subject about which we already have much information: torture notoriously does not produce useful information. It produces a tangled mess of truths, half-truths, lies, wild invention and confabulation, psychotic ravings, and desperate attempts to say whatever the victim thinks the torturers want to hear.

But none of this matters. Nor does it matter how frightened we are. The situation isn’t complicated. We are not allowed to torture people, because we have passed laws against it and signed treaties saying we won’t do it. The U.N. Convention Against Torture, which the U.S. signed in 1994, makes it very clear that being afraid of an attack is no excuse for torture. In Article 2, the Convention states, “No exceptional circumstances whatsoever, whether a state of war or a threat of war, internal political instability, or any other public emergency, may be invoked as a justification of torture.” People will always make excuses, but there is no legitimate excuse for torture.

What’s at stake here is the kind of country we want to be: Are we a courageous nation ruled by laws or a nation of cowards?

False Assumption #2: Torture ended when George W. Bush left office.

In his statement on the day the report was released, President Obama tried once again to shove U.S. torture into a box labeled Bad Things We Used to Do. “Rather than another reason to refight old arguments,” he said, “I hope that today’s report can help us leave these techniques where they belong: in the past.”

In fact, institutionalized state torture is not a thing of the past. It has continued under President Obama. Here are some examples:

*Twice a day in the U.S. prison at Guantánamo, guards forcibly remove hunger strikers from their cells, strap them to a chair, and “feed” them through a tube jammed up the nose and down into the stomach. Here’s how one victim remembered that experience:

“I will never forget the first time they passed the feeding tube up my nose. I can’t describe how painful it is to be force-fed this way. As it was thrust in, it made me feel like throwing up. I wanted to vomit, but I couldn’t. There was agony in my chest, throat, and stomach. I had never experienced such pain before. I would not wish this cruel punishment upon anyone.”

Force-feeding is no humanitarian act; it is a punishment for nonviolent resistance. It often begins with what officials call “cell extraction” — as if prisoners were teeth to be pulled out of a jaw. Here’s what happens, according to Yemini prisoner Moath al-Alwi, who has been at Guantánamo since 2002:

“When I choose to remain in my cell in an act of peaceful protest against the force-feeding, the prison authorities send in a Forced Cell Extraction team: six guards in full riot gear. Those guards are deliberately brutal to punish me for my protest. They pile up on top of me to the point that I feel like my back is about to break. They then carry me out and strap me into the restraint chair, which we hunger strikers call the torture chair.”

Guards use the “torture chair” to restrain the prisoner, says al-Alwi, but also to make the procedure even more painful:

“A new twist to this routine involves the guards restraining me to the chair with my arms cuffed behind my back. The chest strap is then tightened, trapping my arms between my torso and the chair’s backrest. This is done despite the fact that the torture chair features built-in arm restraints. It is extremely painful to remain in this position.”

At present, a Navy nurse faces possible dishonorable discharge for refusing to participate in these force feedings, because he believes they are a form of torture.

Why are detainees on hunger strike in the first place? They are using the only nonviolent means available to them to protest their indefinite and illegal detention, which the U.N. Committee Against Torture says is in itself a violation of U.S. duties under the U.N. Convention Against Torture and Other Cruel, Inhuman, and Degrading Treatment.

* It wasn’t until this December 10th that the U.S. military finally released its last detainees from the notorious Detention Facility in Parwan on Bagram Air Base in Afghanistan. In September 2014, the United States “quietly released” 14 Pakistanis it had held there for some years — none of whom was ever accused of any crime. We know nothing about the treatment of those who remained at Bagram, but we do know that, like the detainees at Guantánamo, the men being held there used hunger strikes as their only nonviolent means of resisting their indefinite detention and solitary confinement.

* In what appears to be a direct contravention of a 2009 presidential executive order to the CIA to shut down all its “black sites,” or secret interrogation centers around the world, the Agency seems still to be operating at least one of them. Or at least it was two years later when journalist Jeremy Scahill reported on a secret underground prison in Mogadishu, Somalia, run by the CIA, ostensibly in cooperation with the Somali government’s National Security Agency. There, according to Scahill, “U.S. intelligence personnel pay the salaries of intelligence agents and also directly interrogate prisoners.”

Have these intelligence agents used “enhanced interrogation techniques”? We don’t know. What we do know, however, was that the place was dark, filthy, and infested with bedbugs and mosquitoes. We know that prisoners held there had been kidnapped, hooded, and transported by plane in a style familiar to anyone who has followed the CIA’s methods over the last dozen years.

If that site is still open, either the CIA is operating it with the Obama administration’s knowledge and consent or it is defying the president of the United States. In either case, there was and possibly still is a serious breach of executive power going on.

* During his confirmation hearings, Obama’s first CIA director, Leon Panetta, told members of Congress that “if the approved techniques were ‘not sufficient’ to get a detainee to divulge details he was suspected of knowing about an imminent attack, he would ask for ‘additional authority’ to use other methods.”

* President Obama’s 2009 executive order ending CIA torture still left open a little-discussed torture window.  It continued to allow for “extraordinary rendition,” the capture of terror suspects abroad and their shipping to other countries for detention and interrogation. The U.S. record on this practice since 9/11 has been a grim history of torture at one remove. True, the order says that no one should be sent to a country in which he or she is likely to be tortured, but the U.S. definition of “likely” differs significantly from that of the U.N. Convention Against Torture.  Article 3 of the Convention says no one may be sent to another country if there are “substantial grounds for believing that he would be in danger of being subjected to torture.” The United States insists on a more lenient standard: prohibiting rendition if it is “more likely than not” that torture will take place. In practice, this means relying on the word of the receiving country that no harm will be done (wink, wink).

* The U.S. Army Field Manual on Human Intelligence Collector Operations prohibits many forms of torture. However, a classified “annex” still permits sleep deprivation and sensory deprivation. The U.N. Committee Against Torture flagged this — among many other concerns — in its recent report on U.S. compliance with the Convention Against Torture.

* No high civilian officials or military commanders and other personnel were ever prosecuted for the torture they ordered or oversaw, nor of course were the actual CIA torturers. Instead they’re writing their memoirs and painting pictures of themselves bathing. If their political power makes it impossible to try them here, perhaps the outrage of the international community can at least make Dick Cheney and George W. Bush outcasts like other discredited former rulers along the lines of Serbia’s Slobodan Milosovic or Tunisia’s Zein el-Abidine Ben Ali.

Or maybe the United States could actually follow the U.N. Committee Against Torture’s recommendation and finally sign up for the International Criminal Court.

False Assumption #3: Torture only counts when it happens in foreign wars.

This is not true either. Sometimes, torture happens right here in the United States in police stations, immigrant detention centers, and the American jails and prisons that hold 2.3 million people.

When the United Nations Committee Against Torture released its report in November on U.S. compliance with the U.N. Convention against Torture, among the failures the Committee noted were torture and abuse practices in U.S. prisons and immigrant detention facilities. The frequent brutality of U.S. police forces and their rapid militarization also alarmed the Committee.

Specifically, the Committee pointed to the extensive use of solitary confinement for periods of time longer than two weeks — the point at which many people start exhibiting signs of psychosis, including having hallucinations, hearing voices, and experiencing paranoia. In my state, California, there are people who have been kept from all human contact for more than 15 years. We are beginning to recognize that the 50,000 to 80,000 people being held in solitary confinement in this country are actually being tortured every day. Furthermore, as the U.N. report emphasizes, some of these people haven’t even been convicted of a crime; they’re either being held in pre-trial detention or in immigrant detention centers.

U.S. prisoners also experience high levels of institutionally sanctioned rape and sexual violence. In fact, prison rape is so common, it’s a regular plot device on television police procedurals. Want to keep a “perp” from asking for a lawyer? Threaten to send him to Rikers Island, where who knows what can happen to a pretty guy like him.

The Report Is Out. Now What?

Make no mistake. Getting even this partial and redacted report into public view is a real victory for everyone who hopes to end state torture. But it’s just the beginning, not the end of the fight. There’s still much work to do.

As a start, someone needs to rein in a CIA whose leadership, past and present, seems remarkably committed to the effectiveness of torture practices. We need reports like the one the Senate produced about the whole alphabet soup of agencies involved in the “war on terror.” We need a full accounting, and full accountability, including prosecutions of those responsible, or perhaps even official pardons that would at least establish that crimes were committed. We need to end torture in our own jails and prisons.

The Senate torture report could be the opening we need to really make U.S. torture a thing of the past. Let’s not waste it!

Rebecca Gordon is the author of Mainstreaming Torture: Ethical Approaches in the Post-9/11 United States. She teaches in the philosophy department at the University of San Francisco. She is a member of the War Times/Tiempo de Guerras collective. You can contact her through the Mainstreaming Torture website.

Follow TomDispatch on Twitter and join us on Facebook. Check out the newest Dispatch Book, Rebecca Solnit’s Men Explain Things to Me, and Tom Engelhardt’s latest book, Shadow Government: Surveillance, Secret Wars, and a Global Security State in a Single-Superpower World.

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Go West, Young Han: As Washington “Pivots” to Asia, China Does the Eurasian Pirouette http://www.readernation.org/go-west-young-han-as-washington-pivots-to-asia-china-does-the-eurasian-pirouette/ http://www.readernation.org/go-west-young-han-as-washington-pivots-to-asia-china-does-the-eurasian-pirouette/#comments Tue, 16 Dec 2014 16:57:16 +0000 http://www.readernation.org/?p=5221 November 18, 2014: it’s a day that should live forever in history. On that day, in the city of Yiwu in China’s Zhejiang province, 300 kilometers south of Shanghai, the first train carrying 82 containers of export goods weighing more than 1,000 tons left a massive warehouse complex heading for Madrid. It arrived on December 9th.

Welcome to the new trans-Eurasia choo-choo train.  At over 13,000 kilometers, it will regularly traverse the longest freight train route in the world, 40% farther than the legendary Trans-Siberian Railway. Its cargo will cross China from East to West, then Kazakhstan, Russia, Belarus, Poland, Germany, France, and finally Spain.

You may not have the faintest idea where Yiwu is, but businessmen plying their trades across Eurasia, especially from the Arab world, are already hooked on the city “where amazing happens!” We’re talking about the largest wholesale center for small-sized consumer goods — from clothes to toys — possibly anywhere on Earth.

The Yiwu-Madrid route across Eurasia represents the beginning of a set of game-changing developments. It will be an efficient logistics channel of incredible length. It will represent geopolitics with a human touch, knitting together small traders and huge markets across a vast landmass. It’s already a graphic example of Eurasian integration on the go. And most of all, it’s the first building block on China’s “New Silk Road,” conceivably the project of the new century and undoubtedly the greatest trade story in the world for the next decade.

Go west, young Han. One day, if everything happens according to plan (and according to the dreams of China’s leaders), all this will be yours — via high-speed rail, no less.  The trip from China to Europe will be a two-day affair, not the 21 days of the present moment. In fact, as that freight train left Yiwu, the D8602 bullet train was leaving Urumqi in Xinjiang Province, heading for Hami in China’s far west. That’s the first high-speed railway built in Xinjiang, and more like it will be coming soon across China at what is likely to prove dizzying speed.

Today, 90% of the global container trade still travels by ocean, and that’s what Beijing plans to change.  Its embryonic, still relatively slow New Silk Road represents its first breakthrough in what is bound to be an overland trans-continental container trade revolution.

And with it will go a basket of future “win-win” deals, including lower transportation costs, the expansion of Chinese construction companies ever further into the Central Asian “stans,” as well as into Europe, an easier and faster way to move uranium and rare metals from Central Asia elsewhere, and the opening of myriad new markets harboring hundreds of millions of people.

So if Washington is intent on “pivoting to Asia,” China has its own plan in mind.  Think of it as a pirouette to Europe across Eurasia.

Defecting to the East?

The speed with which all of this is happening is staggering. Chinese President Xi Jinping launched the New Silk Road Economic Belt in Astana, Kazakhstan, in September 2013. One month later, while in Indonesia’s capital, Jakarta, he announced a twenty-first-century Maritime Silk Road. Beijing defines the overall concept behind its planning as “one road and one belt,” when what it’s actually thinking about is a boggling maze of prospective roads, rail lines, sea lanes, and belts.

We’re talking about a national strategy that aims to draw on the historical aura of the ancient Silk Road, which bridged and connected civilizations, east and west, while creating the basis for a vast set of interlocked pan-Eurasian economic cooperation zones.  Already the Chinese leadership has green-lighted a $40 billion infrastructure fund, overseen by the China Development Bank, to build roads, high-speed rail lines, and energy pipelines in assorted Chinese provinces. The fund will sooner or later expand to cover projects in South Asia, Southeast Asia, the Middle East, and parts of Europe. But Central Asia is the key immediate target.

Chinese companies will be investing in, and bidding for contracts in, dozens of countries along those planned silk roads. After three decades of development while sucking up foreign investment at breakneck speed, China’s strategy is now to let its own capital flow to its neighbors. It’s already clinched $30 billion in contracts with Kazakhstan and $15 billion with Uzbekistan. It has provided Turkmenistan with $8 billion in loans and a billion more has gone to Tajikistan.

In 2013, relations with Kyrgyzstan were upgraded to what the Chinese term “strategic level.” China is already the largest trading partner for all of them except Uzbekistan and, though the former Central Asian socialist republics of the Soviet Union are still tied to Russia’s network of energy pipelines, China is at work there, too, creating its own version of Pipelineistan, including a new gas pipeline to Turkmenistan, with more to come.

The competition among Chinese provinces for much of this business and the infrastructure that goes with it will be fierce. Xinjiang is already being reconfigured by Beijing as a key hub in its new Eurasian network. In early November 2014, Guangdong — the “factory of the world” — hosted the first international expo for the country’s Maritime Silk Road and representatives of no less than 42 countries attended the party.

President Xi himself is now enthusiastically selling his home province, Shaanxi, which once harbored the start of the historic Silk Road in Xian, as a twenty-first-century transportation hub. He’s made his New Silk Road pitch for it to, among others, Tajikistan, the Maldives, Sri Lanka, India, and Afghanistan.

Just like the historic Silk Road, the new one has to be thought of in the plural.  Imagine it as a future branching maze of roads, rail lines, and pipelines. A key stretch is going to run through Central Asia, Iran, and Turkey, with Istanbul as a crossroads site. Iran and Central Asia are already actively promoting their own connections to it. Another key stretch will follow the Trans-Siberian Railway with Moscow as a key node. Once that trans-Siberian high-speed rail remix is completed, travel time between Beijing and Moscow will plunge from the current six and a half days to only 33 hours. In the end, Rotterdam, Duisburg, and Berlin could all be nodes on this future “highway” and German business execs are enthusiastic about the prospect.

The Maritime Silk Road will start in Guangdong province en route to the Malacca Strait, the Indian Ocean, the Horn of Africa, the Red Sea and the Mediterranean, ending essentially in Venice, which would be poetic justice indeed.  Think of it as Marco Polo in reverse.

All of this is slated to be completed by 2025, providing China with the kind of future “soft power” that it now sorely lacks. When President Xi hails the push to “break the connectivity bottleneck” across Asia, he’s also promising Chinese credit to a wide range of countries.

Now, mix the Silk Road strategy with heightened cooperation among the BRICS countries (Brazil, Russia, India, China, and South Africa), with accelerated cooperation among the members of the Shanghai Cooperation Organization (SCO), with a more influential Chinese role over the 120-member Non-Aligned Movement (NAM) — no wonder there’s the perception across the Global South that, while the U.S. remains embroiled in its endless wars, the world is defecting to the East.

New Banks and New Dreams

The recent Asia-Pacific Economic Cooperation (APEC) summit in Beijing was certainly a Chinese success story, but the bigger APEC story went virtually unreported in the United States.  Twenty-two Asian countries approved the creation of an Asian Infrastructure Investment Bank (AIIB) only one year after Xi initially proposed it. This is to be yet another bank, like the BRICS Development Bank, that will help finance projects in energy, telecommunications, and transportation.  Its initial capital will be $50 billion and China and India will be its main shareholders.

Consider its establishment a Sino-Indian response to the Asian Development Bank (ADB), founded in 1966 under the aegis of the World Bank and considered by most of the world as a stalking horse for the Washington consensus. When China and India insist that the new bank’s loans will be made on the basis of “justice, equity, and transparency,” they mean that to be in stark contrast to the ADB (which remains a U.S.-Japan affair with those two countries contributing 31% of its capital and holding 25% of its voting power) — and a sign of a coming new order in Asia.  In addition, at a purely practical level, the ADB won’t finance the real needs of the Asian infrastructure push that the Chinese leadership is dreaming about, which is why the AIIB is going to come in so handy.

Keep in mind that China is already the top trading partner for India, Pakistan, and Bangladesh.  It’s in second place when it comes to Sri Lanka and Nepal.  It’s number one again when it comes to virtually all the members of the Association of Southeast Asian Nations (ASEAN), despite China’s recent well-publicized conflicts over who controls waters rich in energy deposits in the region. We’re talking here about the compelling dream of a convergence of 600 million people in Southeast Asia, 1.3 billion in China, and 1.5 billion on the Indian subcontinent.

Only three APEC members — apart from the U.S. — did not vote to approve the new bank: Japan, South Korea, and Australia, all under immense pressure from the Obama administration. (Indonesia signed on a few days late.) And Australia is finding it increasingly difficult to resist the lure of what, these days, is being called “yuan diplomacy.”

In fact, whatever the overwhelming majority of Asian nations may think about China’s self-described “peaceful rise,” most are already shying away from or turning their backs on a Washington-and-NATO-dominated trade and commercial world and the set of pacts — from the Transatlantic Trade and Investment Partnership (TTIP) for Europe to the Trans-Pacific Partnership (TPP) for Asia — that would go with it.

When Dragon Embraces Bear

Russian President Vladimir Putin had a fabulous APEC. After his country and China clinched a massive $400 billion natural gas deal in May — around the Power of Siberia pipeline, whose construction began this year — they added a second agreement worth $325 billion around the Altai pipeline originating in western Siberia.

These two mega-energy deals don’t mean that Beijing will become Moscow-dependent when it comes to energy, though it’s estimated that they will provide 17% of China’s natural gas needs by 2020. (Gas, however, makes up only 10% per cent of China’s energy mix at present.)  But these deals signal where the wind is blowing in the heart of Eurasia. Though Chinese banks can’t replace those affected by Washington and EU sanctions against Russia, they are offering a Moscow battered by recent plummeting oil prices some relief in the form of access to Chinese credit.

On the military front, Russia and China are now committed to large-scale joint military exercises, while Russia’s advanced S-400 air defense missile system will soon enough be heading for Beijing.  In addition, for the first time in the post-Cold War era, Putin recently raised the old Soviet-era doctrine of “collective security” in Asia as a possible pillar for a new Sino-Russian strategic partnership.

Chinese President Xi has taken to calling all this the “evergreen tree of Chinese-Russian friendship” — or you could think of it as Putin’s strategic “pivot” to China.  In either case, Washington is not exactly thrilled to see Russia and China beginning to mesh their strengths: Russian excellence in aerospace, defense technology, and heavy equipment manufacturing matching Chinese excellence in agriculture, light industry, and information technology.

It’s also been clear for years that, across Eurasia, Russian, not Western, pipelines are likely to prevail. The latest spectacular Pipelineistan opera — Gazprom’s cancellation of the prospective South Stream pipeline that was to bring yet more Russian natural gas to Europe — will, in the end, only guarantee an even greater energy integration of both Turkey and Russia into the new Eurasia.

So Long to the Unipolar Moment

All these interlocked developments suggest a geopolitical tectonic shift in Eurasia that the American media simply hasn’t begun to grasp. Which doesn’t mean that no one notices anything.  You can smell the incipient panic in the air in the Washington establishment.  The Council on Foreign Relations is already publishing laments about the possibility that the former sole superpower’s exceptionalist moment is “unraveling.” The U.S.-China Economic and Security Review Commission can only blame the Chinese leadership for being “disloyal,” adverse to “reform,” and an enemy of the “liberalization” of their own economy.

The usual suspects carp that upstart China is upsetting the “international order,” will doom “peace and prosperity” in Asia for all eternity, and may be creating a “new kind of Cold War” in the region. From Washington’s perspective, a rising China, of course, remains the major “threat” in Asia, if not the world, even as the Pentagon spends gigantic sums to keep its sprawling global empire of bases intact. Those Washington-based stories about the new China threat in the Pacific and Southeast Asia, however, never mention that China remains encircled by U.S. bases, while lacking a base of its own outside its territory.

Of course, China does face titanic problems, including the pressures being applied by the globe’s “sole superpower.” Among other things, Beijing fears threats to the security of its sea-borne energy supply from abroad, which helps explain its massive investment in helping create a welcoming Eurasian Pipelineistan from Central Asia to Siberia. Fears for its energy future also explain its urge to “escape from Malacca” by reaching for energy supplies in Africa and South America, and its much-discussed offensive to claim energy-rich areas of the East and South China seas, which Beijing is betting could become a “second Persian Gulf,” ultimately yielding 130 billion barrels of oil.

On the internal front, President Xi has outlined in detail his vision of a “results-oriented” path for his country over the next decade. As road maps go, China’s “must-do” list of reforms is nothing short of impressive. And worrying about keeping China’s economy, already the world’s number one by size, rolling along at a feverish pitch, Xi is also turbo-charging the fight against corruption, graft, and waste, especially within the Communist Party itself.

Economic efficiency is another crucial problem. Chinese state-owned enterprises are now investing a staggering $2.3 trillion a year — 43% of the country’s total investment — in infrastructure. Yet studies at Tsinghua University’s School of Management have shown that an array of investments in facilities ranging from steel mills to cement factories have only added to overcapacity and so actually undercut China’s productivity.

Xiaolu Wang and Yixiao Zhou, authors of the academic paper “Deepening Reform for China’s Long-term Growth and Development,” contend that it will be difficult for China to jump from middle-income to high-income status — a key requirement for a truly global power. For this, an avalanche of extra government funds would have to go into areas like social security/unemployment benefits and healthcare, which take up at present 9.8% and 15.1% of the 2014 budget — high for some Western countries but not high enough for China’s needs.

Still, anyone who has closely followed what China has accomplished over these past three decades knows that, whatever its problems, whatever the threats, it won’t fall apart. As a measure of the country’s ambitions for economically reconfiguring the commercial and power maps of the world, China’s leaders are also thinking about how, in the near future, relations with Europe, too, could be reshaped in ways that would be historic.

What About That “Harmonious Community”?

At the same moment that China is proposing a new Eurasian integration, Washington has opted for an “empire of chaos,” a dysfunctional global system now breeding mayhem and blowback across the Greater Middle East into Africa and even to the peripheries of Europe.

In this context, a “new Cold War” paranoia is on the rise in the U.S., Europe, and Russia.  Former Soviet leader Mikhail Gorbachev, who knows a thing or two about Cold Wars (having ended one), couldn’t be more alarmed. Washington’s agenda of “isolating” and arguably crippling Russia is ultimately dangerous, even if in the long run it may also be doomed to failure.

At the moment, whatever its weaknesses, Moscow remains the only power capable of negotiating a global strategic balance with Washington and putting some limits on its empire of chaos.  NATO nations still follow meekly in Washington’s wake and China as yet lacks the strategic clout.

Russia, like China, is betting on Eurasian integration.  No one, of course, knows how all this will end.  Only four years ago, Vladimir Putin was proposing “a harmonious economic community stretching from Lisbon to Vladivostok,” involving a trans-Eurasian free trade agreement. Yet today, with the U.S., NATO, and Russia locked in a Cold War-like battle in the shadows over Ukraine, and with the European Union incapable of disentangling itself from NATO, the most immediate new paradigm seems to be less total integration than war hysteria and fear of future chaos spreading to other parts of Eurasia.

Don’t rule out a change in the dynamics of the situation, however.  In the long run, it seems to be in the cards.  One day, Germany may lead parts of Europe away from NATO’s “logic,” since German business leaders and industrialists have an eye on their potentially lucrative commercial future in a new Eurasia. Strange as it might seem amid today’s war of words over Ukraine, the endgame could still prove to involve a Berlin-Moscow-Beijing alliance.

At present, the choice between the two available models on the planet seems stark indeed: Eurasian integration or a spreading empire of chaos. China and Russia know what they want, and so, it seems, does Washington.  The question is: What will the other moving parts of Eurasia choose to do?

Pepe Escobar is the roving correspondent for Asia Times/Hong Kong, an analyst for RT, and a TomDispatch regular. His latest book is Empire of Chaos (Nimble Books). Follow him on Facebook.

Follow TomDispatch on Twitter and join us on Facebook. Check out the newest Dispatch Book, Rebecca Solnit’s Men Explain Things to Me, and Tom Engelhardt’s latest book, Shadow Government: Surveillance, Secret Wars, and a Global Security State in a Single-Superpower World.

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Global Coup: Bail-In Threatens US Depositors http://www.readernation.org/the-global-bankers-coup-the-bail-in-and-financial-stability-board/ http://www.readernation.org/the-global-bankers-coup-the-bail-in-and-financial-stability-board/#comments Sat, 13 Dec 2014 03:17:57 +0000 http://www.readernation.org/?p=5213 On December 11, 2014, the US House passed a bill repealing the Dodd-Frank requirement that risky derivatives be pushed into big-bank subsidiaries, leaving our deposits and pensions exposed to massive derivatives losses. The bill was vigorously challenged by Senator Elizabeth Warren; but the tide turned when Jamie Dimon, CEO of JPMorganChase, stepped into the ring. Perhaps what prompted his intervention was the unanticipated $40 drop in the price of oil. As financial blogger Michael Snyder points out, that drop could trigger a derivatives payout that could bankrupt the biggest banks. And if the G20’s new “bail-in” rules are formalized, depositors and pensioners could be on the hook.

The new bail-in rules were discussed in my last post here. They are edicts of the Financial Stability Board (FSB), an unelected body of central bankers and finance ministers headquartered in the Bank for International Settlements in Basel, Switzerland. Where did the FSB get these sweeping powers, and is its mandate legally enforceable?

Those questions were addressed in an article I wrote in June 2009, two months after the FSB was formed, titled “Big Brother in Basel: BIS Financial Stability Board Undermines National Sovereignty.” It linked the strange boot shape of the BIS to a line from Orwell’s 1984: “a boot stamping on a human face—forever.” The concerns raised there seem to be materializing, so I’m republishing the bulk of that article here. We need to be paying attention, lest the bail-in juggernaut steamroll over us unchallenged.

The Shadowy Financial Stability Board

Alarm bells went off in April 2009, when the Bank for International Settlements (BIS) was linked to the new Financial Stability Board (FSB) signed onto by the G20 leaders in London. The FSB was an expansion of the older Financial Stability Forum (FSF) set up in 1999 to serve in a merely advisory capacity by the G7 (a group of finance ministers formed from the seven major industrialized nations). The chair of the FSF was the General Manager of the BIS. The new FSB was expanded to include all G20 members (19 nations plus the EU).

Formally called the “Group of Twenty Finance Ministers and Central Bank Governors,” the G20 was, like the G7, originally set up as a forum merely for cooperation and consultation on matters pertaining to the international financial system. What set off alarms was that the new Financial Stability Board had real teeth, imposing “obligations” and “commitments” on its members; and this feat was pulled off without legislative formalities, skirting the usual exacting requirements for treaties. It was all done in hasty response to an “emergency.” Problem-reaction-solution was the slippery slope of coups.

Buried on page 83 of an 89-page Report on Financial Regulatory Reform issued by the US Obama administration was a recommendation that the FSB strengthen and institutionalize its mandate to promote global financial stability. It sounded like a worthy goal, but there was a disturbing lack of detail. What was the FSB’s mandate, what were its expanded powers, and who was in charge? An article in The London Guardian addressed those issues in question and answer format:

Who runs the regulator? The Financial Stability Forum is chaired by Mario Draghi, governor of the Bank of Italy. The secretariat is based at the Bank for International Settlements’ headquarters in Basel, Switzerland.

Draghi was director general of the Italian treasury from 1991 to 2001, where he was responsible for widespread privatization (sell-off of government holdings to private investors). From 2002 to 2006, he was a partner at Goldman Sachs on Wall Street. He was succeeded in 2011 by Mark Carney, who also got his start at Goldman Sachs, working there for 13 years before going on to become Governor of the Bank of Canada in 2008 and Governor of the Bank of England in 2012. In 2011 and 2012, Carney attended the annual meetings of the controversial Bilderberg Group.

What will the new regulator do? The regulator will monitor potential risks to the economy . . . It will cooperate with the IMF, the Washington-based body that monitors countries’ financial health, lending funds if needed.

The IMF is an international banking organization that is also controversial. Joseph Stiglitz, former chief economist for the World Bank, charged it with ensnaring Third World countries in a debt trap from which they could not escape. Debtors unable to pay were bound by “conditionalities” that included a forced sell-off of national assets to private investors in order to service their loans.

What will the regulator oversee? All ‘systemically important’ financial institutions, instruments and markets.

The term “systemically important” was not defined. Would it include such systemically important institutions as national treasuries, and such systemically important markets as gold, oil and food?

How will it work? The body will establish a supervisory college to monitor each of the largest international financial services firms. . . . It will act as a clearing house for information-sharing and contingency planning for the benefit of its members. 

“Information-sharing” can mean illegal collusion. Would the information-sharing here include such things as secret agreements among central banks to buy or sell particular currencies, with the concomitant power to support or collapse targeted local economies?

What will the new regulator do about debt and loans? To prevent another debt bubble, the new body will recommend financial companies maintain provisions against credit losses and may impose constraints on borrowing.

What sort of constraints? The Basel Accords, imposed by the Basel Committee on Banking Supervision (also housed at the BIS) had not necessarily worked out well. The first Basel Accord, issued in 1998, had been blamed for inducing a recession in Japan from which that country had yet to recover; and the Second Basel Accord and its associated mark-to-market rule had been blamed for bringing on the 2008 crisis. (For more on this, see The Public Bank Solution.)

The Amorphous 12 International Standards and Codes

Most troubling, perhaps, was this vague parenthetical reference in a press release issued by the BIS, titled “Financial Stability Forum Re-established as the Financial Stability Board”:

As obligations of membership, member countries and territories commit to . . . implement international financial standards (including the 12 key International Standards and Codes) . . . . 

This was not just friendly advice from an advisory board. It was a commitment to comply, so you would expect some detailed discussion concerning what those standards entailed. But a search of the major media revealed virtually nothing. The 12 key International Standards and Codes were left undefined and undiscussed. The FSB website listed them, but it was vague. The Standards and Codes covered broad areas that were apparently subject to modification as the overseeing committees saw fit. They included money and financial policy transparency, fiscal policy transparency, data dissemination, insolvency, corporate governance, accounting, auditing, payment and settlement, market integrity, banking supervision, securities regulation, and insurance supervision.

Take “fiscal policy transparency” as an example. The “Code of Good Practices on Fiscal Transparency” was adopted by the IMF Interim Committee in 1998. The “synoptic description” said:

The code contains transparency requirements to provide assurances to the public and to capital markets that a sufficiently complete picture of the structure and finances of government is available so as to allow the soundness of fiscal policy to be reliably assessed.

Members were required to provide a “picture of the structure and finances of government” that was complete enough for an assessment of its “soundness” — but an assessment by whom, and what if a government failed the test? Was an unelected private committee based in the BIS allowed to evaluate the “structure and function” of particular national governments and, if they were determined to have fiscal policies that were not “sound,” to impose “conditionalities” and “austerity measures” of the sort that the IMF was notorious for imposing on Third World countries? Suspicious observers wondered if that was how once-mighty nations were to be brought under the heel of Big Brother at last.

For three centuries, private international banking interests have brought governments in line by blocking them from issuing their own currencies and requiring them to borrow banker-issued “banknotes” instead. Political colonialism is now a thing of the past, but under the new FSB guidelines, nations could still be held in feudalistic subservience to foreign masters.

Consider this scenario: the new FSB rules precipitate a massive global depression due to contraction of the money supply. XYZ country wakes up to the fact that all of this is unnecessary – that it could be creating its own money, freeing itself from the debt trap, rather than borrowing from bankers who create money on computer screens and charge interest for the privilege of borrowing it. But this realization comes too late: the boot descends and XYZ is crushed into line. National sovereignty has been abdicated to a private committee, with no say by the voters.

Marilyn Barnewall, dubbed by Forbes Magazine the “dean of American private banking,” wrote in an April 2009 article titled “What Happened to American Sovereignty at G-20?”:

It seems the world’s bankers have executed a bloodless coup and now represent all of the people in the world. . . . President Obama agreed at the G20 meeting in London to create an international board with authority to intervene in U.S. corporations by dictating executive compensation and approving or disapproving business management decisions.  Under the new Financial Stability Board, the United States has only one vote. In other words, the group will be largely controlled by European central bankers. My guess is, they will represent themselves, not you and not me and certainly not America.

The Commitments Mandated by the Financial Stability Board Constitute a Commercial Treaty Requiring a Two-thirds Vote of the Senate

Are these commitments legally binding? Adoption of the FSB was never voted on by the public, either individually or through their legislators. The G20 Summit has been called “a New Bretton Woods,” referring to agreements entered into in 1944 establishing new rules for international trade. But Bretton Woods was put in place by Congressional Executive Agreement, requiring a majority vote of the legislature; and it more properly should have been done by treaty, requiring a two-thirds vote of the Senate, since it was an international agreement binding on the nation.

“Bail-in” is not the law yet, but the G20 governments will be called upon to adopt the FSB’s resolution measures when the proposal is finalized after taking comments in 2015. The authority of the G20 has been challenged, but mainly over whether important countries were left out of the mix. The omitted countries may prove to be the lucky ones, having avoided the FSB’s net.

____________________

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 200+ blog articles are at EllenBrown.com.

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A Reader Story http://www.readernation.org/a-reader-story/ http://www.readernation.org/a-reader-story/#comments Thu, 04 Dec 2014 12:43:01 +0000 http://www.readernation.org/?p=5210

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On Modernizing the U.S. Nuclear Arsenal http://www.readernation.org/on-modernizing-the-u-s-nuclear-arsenal/ http://www.readernation.org/on-modernizing-the-u-s-nuclear-arsenal/#comments Wed, 03 Dec 2014 19:28:47 +0000 http://www.readernation.org/?p=5200 The Los Angeles Times ran front-page articles on November 9 and 10, 2014, on modernizing the US nuclear arsenal. The first article was titled, “Costs rise as nuclear arsenal ages.” The second article was titled, “Arsenal ages as world rearms.” Both were long articles and the authors made the case that there is no choice but for the United States to modernize its nuclear arsenal, delivery systems and infrastructure at great expense to taxpayers, estimated at $1 trillion over the next three decades.

The authors, reporters for the newspaper, write, “The Defense Department’s fleet of submarines, bombers and land-based missiles is also facing obsolescence and will have to be replaced over the next two decades, raising the prospect of further multibillion-dollar cost escalations.” This statement might be acceptable as a quote from a Defense Department official or in an opinion piece, but it hardly reflects the objectivity of professional reporters. It sounds more like an unattributed statement from a Defense Department official or from a “defense” corporation press release.

In fact, there is a viable option that was not touched upon in the articles. The United States could choose instead to fulfill its legal obligations under the 1968 Nuclear Non-Proliferation Treaty to negotiate in good faith to end the nuclear arms race at an early date and to achieve complete nuclear disarmament. This would not be easy, but it would be far preferable to continuing the nuclear arms race through the 21st century. For the United States to convene such negotiations would demonstrate leadership in moving the world away from nuclear Armageddon and toward compliance with international law.

In pursuing this option, “defense” corporations would likely suffer shortfalls in their profits, but the huge sums proposed to be spent on the modernization of the US nuclear arsenal could be shifted to providing for the basic needs of the poorest citizens and for restoring the country’s deteriorating infrastructure. The truth is that nuclear weapons are obsolete for providing 21st century security against terrorist organizations, failed states, environmental destruction or climate chaos.
Do we really want to pass along the threat of nuclear warfare, by accident or design, which could destroy civilization, to our grandchildren and their grandchildren? Enough is enough. It is time, as Einstein argued more than a half century ago, to change our modes of thinking or face “unparalleled catastrophe.”

No country has the right to threaten the future of civilization and complex life with weapons of massive destructive power. Modernization of the US nuclear arsenal is not the only choice we have. A far better and saner choice is to end the nuclear weapons era, and that can only be done by diplomacy and negotiations for a nuclear weapons-free world.
Rather than creating a financial feeding frenzy for “defense” contractors and essentially throwing away a trillion dollars over the next three decades in the illegal pursuit of nuclear modernization, the United States could choose now to lead the world in seeking planetary nuclear zero. This would be a worthy pursuit for a great nation.

This article was originally published by Truthout.  This entry was posted in Nuclear Disarmament, President’s Message and tagged David Krieger on November 24, 2014 by David Krieger.

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How To Rock Your Community: Participatory Budgeting http://www.readernation.org/how-to-rock-your-community-participatory-budgeting/ http://www.readernation.org/how-to-rock-your-community-participatory-budgeting/#comments Mon, 01 Dec 2014 06:41:03 +0000 http://www.readernation.org/?p=5194

Real Money, Real Power: Participatory Budgeting 2014 from PBP on Vimeo.  Participatory Budgeting (PB) is a democratic process in which community members directly decide how to spend part of a public budget. It gives ordinary people real power over real money, letting them work with government to make the budget decisions that affect their lives.
The Participatory Budgeting Project (PBP) is a non-profit organization that works with governments and organizations to develop participatory budgeting processes. Our mission is to empower people to decide together how to spend public money. We create and support participatory budgeting processes that deepen democracy, build stronger communities, and make public budgets more equitable and effective.

Find out more at participatorybudgeting.org.

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